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Volvo allocates $783 million for fixing faulty emissions control

Swedish manufacturer Volvo Group, the parent of Volvo Trucks North America and Mack Trucks, recently set aside approximately $783 million to cover the estimated cost of addressing a faulty emissions control component used in diesel engines.

Volvo said the faulty component, which is used in certain models and markets, including North America and Europe, “may degrade more quickly than expected, affecting the vehicles emission performance negatively.”

The OEM previously said the degradation could cause affected engines to exceed emissions limits for nitrogen oxides (NOx).

The estimated costs are based on several factors, the company said, including testing of vehicles, statistical analysis and dialogue with relevant authorities.

“The next step is to define how to implement corrective actions concerning the component in vehicles affected by this issue,” Volvo said.

According to Volvo, the “degradation of the component in question does not pose a product safety issue, nor does it negatively affect vehicle or engine performance in areas other than emissions control. The degradation is a result of a materials issue that occurs over time. All engines and vehicles equipped with the component meet emissions limits at delivery.”

The provision was expected to impact income in late 2018, with a negative cash flow effect starting in 2019 and “gradually ramp up,” the company said, adding it will continuously assess the size of the provision.